VanEck files for physically backed bitcoin ETF

Jun 13th, 2018 | By | Category: Alternatives / Multi-Asset

VanEck has partnered with blockchain company SolidX to propose a physically backed bitcoin ETF that would be insured against loss or theft of bitcoin. The two companies filed a joint request with the US Securities and Exchange Commission (SEC) for approval of the fund, which is currently under review.

VanEck is awaiting approval from the SEC for its physically-backed bitcoin ETF.

VanEck is awaiting approval from the SEC for its physically backed bitcoin ETF.

Jan van Eck, chief executive officer of VanEck, commented, “I believe that bitcoin has emerged as a legitimate investment option, as a type of ‘digital gold’ that may make sense for investors’ portfolios. The SolidX team has in-depth experience with bitcoin, cryptography, and capital markets. We’re pleased to join with them in supporting the effort to bring a physically backed bitcoin ETF to market.”

Van Eck continued, “We believe that collectively we will build something that may be better than other constructs currently making their way through the regulatory process. A properly constructed, physically backed bitcoin ETF will be designed to provide exposure to the price of bitcoin, and an insurance component will help protect shareholders against the operational risks of sourcing and holding bitcoin.”

Regulators have to date refused approval of a bitcoin-backed ETF, citing low liquidity and the risk of fraudulent activities due to the lack of regulation in major digital asset markets. They have rejected several previous filings from a number of would-be providers, including those of VanEck in August 2017 and SolidX in March 2016. Other than the aforementioned, those seeking to launch their own digital asset ETFs include the Winklevoss twins, Evolve Funds, and ProShares—which also filed for a short (or inverse) bitcoin ETF.

If VanEck’s latest filing garners approval from the SEC, the ETF would list on the Cboe BZX Equities Exchange. The share price of the ETF would be around $200,000 in order to target institutional investors.

VanEck has a history of fostering new investment products, from the first gold-focused mutual fund and gold miners’ ETF, to more recent strategies, including emerging markets debt as well as a series of guided allocation approaches. VanEck has taken this same attitude towards bitcoin and other digital assets.

In November 2017, VanEck’s indexing division—MV Index Solutions (MVIS)—launched a series of indices designed to track the performance of the cryptocurrency market. The indices were unveiled in partnership with CryptoCompare, a London-based digital asset data provider.

The MVIS CryptoCompare Indices utilise a digital asset pricing methodology incorporating pricing and trade data from 50+ major digital asset exchanges around the world. Prices are weighted by volume on a continual basis in order to facilitate global price discovery.

The series includes twelve single digital asset indices, tracking the performance of Bitcoin, Ethereum, and Ripple, among others, through the following four multiple digital asset indices: MVIS CryptoCompare Digital Assets 5 IndexMVIS CryptoCompare Digital Assets 10 IndexMVIS CryptoCompare Digital Assets 25 Index, and the MVIS CryptoCompare Digital Assets 100 Index.

The multiple digital asset indices provide exposure to the five, ten, 25, and 100 largest and most liquid cryptocurrencies exchanged globally. An index capping methodology for multi-component indices promotes diversification and increases exposure to emerging digital assets.

MVIS noted the series are the first digital asset indices to meet investment industry benchmarking standards by providing a public rulebook for fork treatments and other events, industry-wide data distribution, proper identifiers and further standard index governance requirements that are expected from a regulated, unaffiliated, major benchmark provider.

Therefore, if regulators were to one-day change their stance on cryptocurrency ETFs, the MVIS indices could serve as viable underlying references to those products.

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